Consumers Help Builders Reduce Risk

By John Burns

October 19, 2004 (All day)

The remainder of the decade will bring dramatic changes to the home building landscape, particularly as it relates to consumer research. Whereas the prior generation of home builders made decisions based on good instincts, the current generation of leadership prefers a combination of good instincts and independent verification of the facts. The current generation is helped by the fact that there is so much more data available to analyze than before.

The world class consumer research processes will be a five-step process:

The most successful builders will make ongoing consumer research part of their business. One or more people will be devoted full-time to research. The research conducted will be focused on improving future, unidentified communities as much as it will be to support floor plan design and other decisions at current communities. Almost all research will be reused and will serve multiple purposes. These internal company researchers will do the following:

Communicate - They will be aware of all research being done throughout the company and will make certain that no research goes to waste, and all decision makers can benefit from research done by others

Analyze - They will conduct real analysis of the data as opposed to just massive cross-tabulations done by the many survey companies who know little about home building.

Strategize - They will provide direction to the land acquisition team who will focus on land that will be consistent with company strategy.

Design - They will refine and reuse floor plans. In our opinion, by 2010, no major builder will hire an architect without previously conducting the appropriate qualitative and quantitative research to understand the target buyers. The architect business will be under siege as the big builders will have perfected the process of modifying existing floor plans to make them better each time. The best architects will start their own research shops (real research shops - not seminars touting the latest book they read) and amortize the cost over all of their clients.

Reduce Risk - Research adds certainty to executive decision makers, which in turn makes executives more productive and can also make it easier to raise capital when the capital sources have confidence that the builder has done their homework.

Over time, the best builders will maximize their return on research. The dollars spent on research will be very low in comparison to the corresponding reduction in risk.